A business is an organization or entity that sells goods or services for a profit. The important part of this definition is that a business is something that operates in order to make a profit. Not all businesses actually are successful enough make a profit, but their main purpose is to generate profits.
There are three mains legal forms a business can take: sole proprietorship, partnership, and corporation. Each of these legal forms has distinct characteristics as well as advantages and disadvantages.
A sole proprietorship is a business organization, or lack their of, where the business owner and the business itself is one entity. For example, if you made some lemonade and sold it at the end of your road, you would be considered a sole proprietorship. No legal documents need to be created for filed to start a sole prop. It starts as soon as you start your business. The main disadvantage of a sole prop is that the owner is not protected with limited liability.
A partnership is an organization where a few partners join to form a business. The partners can be individuals, partnerships, or even corporations. There are many different types of partnerships including LLCs, LLPs, and other various. All of these have different advantages and disadvantages, but the main advantage to a partnership is that multiple partners can own the business and work together to generate profits.
A corporation is the most common form of business because it is the most adaptive. The corporate structure allows shareholders to own a percentage of the business with maintaining limited liability protection. This means that shareholders canít be sued for corporate debts or malpractice. One of the main advantages of the corporate structure is the ease of ownership transfer. Shareholders can easily purchase or sell stocks without affecting the companyís operations.
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